PRICING INTELLIGENCE

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Contents
Introduction...........................................................................................................................................3
Is the price right for your product?........................................................................................................3
Pricing maturity.....................................................................................................................................4
Profitable selling....................................................................................................................................5
Happiest Minds advantage....................................................................................................................5
Benefits.................................................................................................................................................7

Case study............................................................................................................................................8

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Introduction
An intelligent pricing model takes into account more than market intuitions. It considers the degree of demand, supply and
product/service scope down-to-the-T as parameters before determining the price. Therefore, its imperative for enterprises,
regardless of their scale to adopt a holistic intelligent pricing solution that customarily aligns itself to the company and the
market dynamics it faces. An ideal pricing model turns to analytics to make a decisive choice by considering a host of
factors such as reference prices, cost prices, sales prices, forecasts, expected demand, market intel and wholesale
acquisition costs to arrive at a set of actionable insights. While arriving at these insights is one side of a coin, determining
what insights to go with is another. This paper talks about how the both work in detail.

Is the price right for your product?

Yes, you have a dynamic sales team which determines the pricing decisions for you based on their intuition; nevertheless,
are they well equipped with superior visibility of the competition, munitions to handle pricing exceptions and a streamlined
pricing process? A manager needs to have a firm grip on the local market dynamics while deciding the product price strategy. An informal pricing strategy can spell doom for an organization not just through exposure to regulatory compliance
hazards, but via government liabilities too.
If we look at the health sector, we'll notice without much ado that the negotiating power of health maintenance organizations, hospitals, and clinics is far higher as compared to retail pharmacies, this is because they enjoy a better hold over the
prescription practices of doctors. The discount generally offered on a drug depends on its market performance along with
the ability of the purchasing organization to swing market share by favoring a particular brand.

Customers
Manage the value delivered so that
customers acknowledge and pay for it

Pricing
Profitability

Competitors
Manage industry intelligence
for consistent profitability

Resources
Assignment of resources to
the most profitable activities

An integrated analysis of all the above factors goes miles together in maximizing the margins as well as checking revenue erosion throughout the distribution chain. A comprehensive pricing intelligence system has built-in demand forecasting, management and negotiation processes; advanced data models and guidelines to keep you on track along with smart
market insights and the required management control over for your customers in multiple markets.
3

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Pricing Maturity
We start on the journey of attaining a holistic as we gain a firm understanding and control on the following:
Realized Price Volume
Customer Profit Volume
Customer Profit Price
Realized Price Sales Person
This is undertaken by standardizing the pricing decision efforts, centralization of pricing process and leveraging business
control.
As we reach mid-maturity levels (Level 3-4), our objectives circle around managing the value delivered so that customers
acknowledge a great extent of it and pay accordingly. This is enabled by pricing systems which arm you with valuable
insights into the market trends and channels.
This is further followed by optimization of the tools, integrating databases, pricing policy enforcement and finally achieving
excellence in execution through a well-oiled pricing organization structure.

World Class Pricing - Process Maturity

World
Class

Level 5

Mature
Process

<1% of companies

Excellence in execution

Level 4
Optimization Tools

Level 3

Price Value
Analysis

20% of companies

Value process in place

Level 2

Gain Control

<10% of companies

Optimization
Level 5Process
in Place

40% of companies

Internal process in place

Level 1

Process
maturity levels

30% of companies

Base line process Ineffective

Manufacturing Pricing Excellence 2013 Pricing Conference

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Profitable selling
Analytics can help you take business decisions proactively and optimize your strategy accordingly. The internal availability of
prices at each level of the entire distribution chain helps in analyzing the impact of the price change and formulate the response
accordingly. The ability to simulate price points and quantities along with market trends helps further to forecast demand and
shore up reserves accordingly. An indicative diagram below of the intricate flow of goods and financial transactions among channel partners in the U.S.

Pharma
Corp.

Negotiated Payment
Volume
Discounts

Pharmacy
Benefits
Manager
Pharmacies
Negotiated Payment

Wholesaler/
Distributor

Employer/
Plan Sponcer

Product Flow
Payment Flow
Rebate Flow

Premium

A price increase of 1%
generates an
11% increase in
operating profits
- McKinsey and Company

Flow of Goods and Financial Transactions among Channel Partners in U.S. - Indicative

Happiest minds advantage

Happiest Minds provides you with the demonstrated capability of building a customized pricing Intelligence solution
according to your existing pricing models, structure of distribution channel, available data on sales price, volumes, cost
prices and referential market prices. The system can then be designed to simulate market conditions to arrive at a
suitable price-volume plan for a customer. These strategies can be created either for a single drug or for multiple drugs
in the portfolio to a customer as required.

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Analyse Current
Drug Prices

Check market trends

Create Pricing
Strategy

Price-Volume for entire

drug portfolio to Partner

Analyse channel margins

Check price and volume Price for blockbusters
Price for single product
levels
sale
Forecast demand
according to trend and
channel intelligence

Resolve pricing
ambiguity

Approve Pricing
Strategy

Approve pricing for

single product
Approve for entire
portfolio to a partner
Suggest price floors
and ceilings

Resolved Price
Negotiations
with
Channel Partners
Resolved Price Accurate fact based
Volume approval
negotiation according
to insights from Pricing
Flow of Resolved
system
price and purchase
order to ERPs
Arrive at Negotiated
Price validated by
Pricing system

Dashboard
Report/Charts at each step

The system will be powered by a superior analytics engine based on your intelligent pricing models which can be
amended to accomodate your business processes and needs.

100

Price
to Stockist

PTS from IMS data

20

Discount
80

Cost to Partner

12

SG&A
Landed Cost

44

30% of Cost
15% of Cost
Landed Cost

12

Duties
FOB

Cost
24

Margin

20% of PTS

32

37.5% of FOB
FOB

0 20 40 60 80 100

Snapshot of the Pricing Analysis methodology used in the system

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Benefits

Maximized drug lifetime value

Pricing uniformity across org.

Portfolio/Scenario Analysis

PRICING INTELLIGENCE
Market price insights-Reference pricing

Reduced revenue erosion

Fact based Pricing than on hunches

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Case study
Client
Leading Indian Pharma major with USD $1.4 Billion annual revenue
Client Situation
Client faced the problem of significant revenue leakage amounting to 1-2% of total revenue owing to channel inefficiencies,
outdated prices, incorrect charge backs and rebates. They were also losing out on their profits due to non-availability of an
effective mechanism for revision and realignment of product prices.
Happiest Minds Solution
Service delivered on a fast track mode on client request to plug the inefficiencies at the earliest
A holistic intelligent price solution was established which comprised of integrated cost data, forecasts, expected demand,
market intel, reference prices from external systems as MIDAS IMS and wholesale acquisition cost (WAC) to arrive at
management actionable insights
Set up robust analytics engine based on multiple pricing models as Transfer, Royalty & Margin sharing
Software & Services
Development- Microsoft stack using Smart Client & .NET 4.0
Presentation through WPF- Windows Presentation Framework
Service Oriented Architecture, WCF (Secured Services)
Infrastructure & Persistence components: Enterprise Library 5.0, ADO.NET library/Entity Framework/ LINQ
Achievements- Within first fiscal
Built negotiation plan for partners constituting the top 80% of their business
Negotiation complete for an Upside of $14 million across markets
Decreased commissions for multiple partners across geographies
Analyzed prices to realize around $1 million upside with a partner
Benefits
Price intelligence capability, market insights, referential prices from various databases
Basis to carry out negotiations with partners
Market assessment historical growth rate of value and volumes
Agility in competitive pricing
Provides potential to increase top-line and bottom-line through price increase
Portfolio Analysis of products
Reduces price erosion
Effective decision making driven by real-time integrations & reports

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About the Author

Nihar has over 6 years of experience working in various areas in the Life Sciences domain. He has
extensive exposure on systems and processes pertaining to Research & Development, Product
Registration, Price Analytics, BI & Reporting, GRC, Content Management, Incident & Change Management. He holds a Masters degree in business administration and has also completed a graduate
degree in Biotechnology.
Nihar

Lead Business Analyst,

Life Sciences.

About Happiest Minds

Happiest Minds is a next generation IT services company combining unparalleled experience, comprehensive capabilities
across all industries and business roles, and forward-thinking advisory capabilities for the worlds top businesses, governments and organizations. Happiest Minds collaborates with clients to help them differentiate and win with a unique blend
of solutions and services based on the core technology pillars of cloud computing, social computing, mobility and analytics.
Founded in 2011, Happiest Minds is privately held with headquarters in Bangalore, India and offices in the USA and UK.
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